Business description of DUTCH-BROS-INC from last 10-k form
GLOSSARY
As used in this Annual Report on Form 10-K (this Form 10-K), the terms identified below have the meanings specified below unless otherwise noted or the context requires otherwise. References in this Form 10-K to “Dutch Bros,” the “Company,” “we,” “us” and “our” refer to Dutch Bros Inc. and its consolidated subsidiaries unless the context indicates otherwise.
•AUV refers to the average unit volume.
•CDC refers to the Centers for Disease Control and Prevention.
•Co-Founder refers to Travis Boersma and affiliated entities over which he maintains voting control.
•Continuing Members refers to the Co-Founder and the Sponsor.
•Dutch Bros OpCo refers to Dutch Mafia, LLC, a Delaware limited liability company and direct subsidiary of Dutch Bros Inc.
•Dutch Bros PubCo refers to Dutch Bros Inc., a Delaware corporation, in which its Class A common stock are publicly traded on the New York Stock Exchange under the symbol “BROS”.
•Dutch Bros Tax Group has the meaning set forth in NOTE 10 — Tax Receivable Agreements to the Consolidated Financial Statements.
•IPO refers to our initial public offering.
•OpCo Units refers to Class A common units, Class B voting units and Class C voting units of Dutch Bros OpCo, each as further defined in the Third Amended and Restated Limited Liability Company Agreement of Dutch Bros OpCo, collectively.
•Pre-IPO Blocker Holders refers to TSG7 A AIV VI Holdings-A, L.P. and DG Coinvestor Blocker Aggregator, L.P. or their assignees or successors pursuant to the terms of the certain Reorganization Tax Receivable Agreement.
•QSR refers to Quick Service Restaurant.
•Reorganization Transactions has the meaning set forth in NOTE 1 — Organization and Nature of Operations to the Consolidated Financial Statements.
•Sponsor refers to TSG Consumer Partners, L.P. and certain of its affiliates.
•Tax Receivable Agreements, TRAs, Exchange Tax Receivable Agreement and Reorganization Tax Receivable Agreement shall each have the meaning set forth in NOTE 10 — Tax Receivable Agreements to the Consolidated Financial Statements.
•Western United States refers to the collection of states including Arizona, California, Colorado, Idaho, Nevada, New Mexico, Oregon, Utah and Washington.
Dutch Bros, our Windmill logo (
), Dutch Bros Blue Rebel and our other registered and common law trade names, trademarks and service marks are the property of Dutch Bros Inc. All other trademarks, trade names and service marks appearing in this Form 10-K are the property of their respective owners. Solely for convenience, the trademarks and trade names in this Form 10-K may be referred to without the ® and ™ symbols, but such references should not be construed as any indicator that their respective owners will not assert their rights thereto.
), Dutch Bros Blue Rebel and our other registered and common law trade names, trademarks and service marks are the property of Dutch Bros Inc. All other trademarks, trade names and service marks appearing in this Form 10-K are the property of their respective owners. Solely for convenience, the trademarks and trade names in this Form 10-K may be referred to without the ® and ™ symbols, but such references should not be construed as any indicator that their respective owners will not assert their rights thereto.Dutch Bros Inc.| Form 10-K | 1 FORWARD-LOOKING STATEMENTS
Certain statements in this Form 10-K, including the impact of COVID-19 on our results of operations, supply chain or liquidity, the potential impact of actions we have taken to mitigate the impact of unforeseen circumstances, COVID-19, taxes and tax rate and our expectations regarding the opening of the number of new shops, are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. We use words such as “anticipate,” “believe,” “could,” “should,” “estimate,” “expect,” “intend,” “may,” “predict,” “project,” “target,” and similar terms and phrases, including references to assumptions, to identify forward-looking statements. These forward-looking statements are based on information available to us as of the date any such statements are made, and we assume no obligation to update these forward-looking statements. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those described in the statements. You should not place undue reliance on forward-looking statements, which speak only as of the date of this Form 10-K.
While we believe that our assumptions are reasonable, we caution that it is very difficult to predict the impact of known factors, and it is impossible for us to anticipate all factors that could affect actual results. You should evaluate all forward-looking statements made in this report in the context of the factors that could cause outcomes to differ materially from expectations. These factors include, but are not limited to, those listed under “Item 1A. Risk Factors” of this report, as such risk factors may be amended, supplemented or superseded from time to time by other reports we file with the Securities and Exchange Commission.
You should read the consolidated financial statements and the related notes in this Form 10-K together with our analysis and discussion of our consolidated financial condition and results of operations and other financial information included elsewhere in this Form 10-K.
Website Disclosure
We use our website as a distribution channel of material company information. Financial and other important information regarding our company is routinely posted on and accessible through our website at https://investors.dutchbros.com. In addition, you may automatically receive email alerts and other information about our company when you subscribe your email address by visiting the “Investor Email Alerts” section of our investor relations page at https://investors.dutchbros.com/resources. The information on our website is not incorporated herein or otherwise a part of this Form 10-K.
Dutch Bros Inc.| Form 10-K | 2ITEM 1. BUSINESS
Dutch Bros Inc. is a Delaware corporation, formed on June 4, 2021 for the purpose of facilitating our IPO in September 2021 in order to carry on the Company’s business. Dutch Bros Inc. Class A common stock trades on the New York Stock Exchange under the symbol “BROS”.
OUR COMPANY
Dutch Bros is a high growth operator and franchisor of drive-thru shops that focus on serving high QUALITY, hand-crafted beverages with unparalleled SPEED and superior SERVICE. Founded in 1992 by brothers Dane and Travis Boersma, Dutch Bros began with a double-head espresso machine and a pushcart in Grants Pass, Oregon. Today, we believe that Dutch Bros is one of the fastest-growing brands in the foodservice and restaurant industry in the United States by location count. In the past 6 years, we have increased our shop count from 254 shops in seven states at the end of 2015 to 538 shops in 12 states as of December 31, 2021, of which 271 were company-operated shops and 267 franchise shops. Our shops are located in Arizona, California, Colorado, Idaho, Kansas, Nevada, New Mexico, Oklahoma, Oregon, Texas, Utah, and Washington.
While our espresso-based beverages are still at the core of what we do, Dutch Bros now offers a wide variety of unique, customizable cold and hot beverages that strive to delight a broad array of customers. Dutch Bros is more than just the products we serve—we are dedicated to making differences in the lives of our employees, customers and communities. The combination of hand-crafted and high-quality beverages, our unique drive-thru experience and our community-driven, people-first culture has allowed us to successfully open new shops and continue to share the “Dutch Luv.”
In 2021, our company-operated shops generated gross margin of 21.1% and contribution margin, a non-GAAP financial measure, of 25.1%1. These highly attractive financial returns generated by our existing and new shops, coupled with our desire to develop our people and culture, have led us to focus primarily on company-operated shops as we accelerate our new shop development, all while our current franchise partners continue to open new shops in their existing markets.
Dutch Bros Inc.| Form 10-K | 3The Dutch Bros Experience
Dutch Bros is entirely focused on delivering on its core values of QUALITY, SPEED and SERVICE in every interaction we have. Every visit to Dutch Bros should feel like a celebration. Broistas are genuinely excited to serve our customers and interested in how they can make their day better. Runners greet our customers before they get to the drive-thru window to personalize every order and, when needed, explain our menu. They use tablets to take orders, allowing broistas to sequence the crafting of beverages and manage car throughput in the drive-thru lane, ensuring that QUALITY, SPEED and SERVICE remain consistent throughout the day. This Dutch Bros experience has built our strong base of recurring, loyal customers and contributed to our sustained growth.
Our Broistas
Our people are the key to our success, and broistas are the face of Dutch Bros. We embrace a customer-first attitude and use every interaction during the drive-thru experience to connect with our customers. To achieve this experience, we and our franchise partners are committed to attracting and retaining broistas who are passionate about delivering an experience that exceeds our customers’ expectations each and every day. Our broistas are trained and provided with support to enable them to remember our regular customers by name, recall their usual order, have treats ready for four-legged members of the family and know when to offer a complimentary drink to someone having a tough day. Broistas serve our beverages to our customers with a smile, an encouraging word, or a high-five.
Our Menu
Our hand-crafted beverage-focused lineup features hot and cold espresso-based beverages, cold brew coffee products, our proprietary Dutch Bros. Blue Rebel energy drinks, tea, lemonade, smoothies and other beverages curated from the Dutch Bros “secret” menu where customers can customize their beverages, such as adding “soft-top,” a sweet, creamy whipped topping, to almost any order. Our Private Reserve coffee is a 100% Arabica three bean blend sourced through our in-house coffee roasting facility and extracted using the finest La Marzocco machines to deliver shots of smooth, full-bodied espresso. The variety, innovation and customization of our menu drives broad demographic appeal and balance throughout the day and across all geographies.
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1 Reconciliation of GAAP to non-GAAP results is provided in the section “Non-GAAP Financial Measures” in Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations”.
Dutch Bros Inc.| Form 10-K | 4
Our Shops
Our business model is built around highly efficient drive-thru shops, which place a premium on customer convenience without sacrificing the personal experience. Our new shops are typically 865 to 950 square feet, and we target lots that are at least 25,000 square feet to handle substantial car volume throughout the day. All our shops deploy either a single or double drive-thru window with multiple feeder lanes for traffic flow. Most of our shops also have walk-up ordering windows, party patios and escape lanes to prevent unnecessary congestion. In 2021, our company-operated shops generated AUVs of approximately $1.8 million with strong shop-level gross margin of 21.1% and contribution margin, a non-GAAP financial measure, of 25.1%1.
Our Growth
Our Long-Term Franchise Partners
Historically, Dutch Bros used a franchising strategy alongside company-operated shop development to drive growth in select markets. Over time, as we decided to grow more from within, we only offered franchise partnership opportunities to the highest-quality employees within our network. In 2008, we stopped selling franchises to people that did not come from within our system. In 2017, we decided to stop franchising altogether and moved to a company-operated strategy with all operators recruited from within our system. While we maintain great relationships with our existing franchise partners and they continue to open new shops as they look to infill their high-demand markets, the majority of our growth is expected to continue to come from company-operated shops.
A People-First Culture
We believe that our success is correlated with employee engagement, which is dependent on hiring, retaining, developing, and motivating employees. We plan all our new shop growth around existing, high-performing Dutch Bros broistas ready to assume leadership roles and eventually become shop managers and then operators. We believe this ensures a consistent experience and extends our culture in all our shops and markets. In 2021, we successfully entered Texas, Oklahoma and Kansas by promoting leaders from within.
Simplify Operations and Grow the Business
Over the last several years, we executed critical, infrastructure-building corporate investments to position us for future growth, including: our loyalty app, ERP and HRIS tools, an enterprise-based point of sale tool for all shops in the system, expansion of capacity in our Grants Pass, Oregon roasting facility and the addition of industry experts to our leadership team. We made these foundational investments in our organizational infrastructure and employees to support future new shop growth.